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Commercial Division Finds Foreign Corporations Lack Sufficient Contacts with New York for Personal Jurisdiction

On July 5, 2018, Justice Saliann Scarpulla of the Commercial Division granted a motion to dismiss by All Nippon Airways, Co. Ltd., ANA Aircraft Technics, Co., Ltd., ANA Base Maintenance Technics, Co., Ltd., ANA Holdings, Inc., and All Nippon Airways Co., Ltd. (collectively “ANA”) in Kyowa Seni, Co. v. ANA Aircraft Technics Co.[i], ruling that the Court lacked both general and specific jurisdiction over ANA.

Background

Kyowa Seni, Co., Ltd. (“Kyowa”) brought this action to recover damages for fraud against ANA.  Kyowa and ANA are Japanese companies.  In 2003, they entered into a Memorandum of Understanding (“MOU”) in Japan for Kyowa to manufacture seat covers for ANA’s airplanes.  Shortly thereafter, ANA terminated the MOU after Kyowa requested confirmation that ANA was performing flammability tests on the seat covers for which Kyowa had already issued certificates of compliance.[ii]  In 2007, Kyowa filed a lawsuit against ANA in Japan.  The Japanese trial court dismissed the claim, ruling that ANA did not have any liability to Kyowa. Kyowa appealed and the dismissal was ultimately upheld by the Tokyo High Court.  On February 2, 2017, Kyowa filed its complaint in this New York action alleging fraud based on the same acts and transactions as were at issue in the Japanese action.[iii]

Discussion

In its complaint, Kyowa alleged that the Commercial Division could exercise general jurisdiction over ANA because ANA was registered to do business in New York and had appointed the New York Secretary of State as its agent for service of process.[iv]  In the alternative, Kyowa alleged that the Court could exercise specific jurisdiction over ANA through New York’s long-arm statute.

First, Justice Scarpulla began by analyzing the issue of general jurisdiction.  She explained that after the Supreme Court’s decision in Daimler, most New York courts had rejected general jurisdiction by consent based on corporation registration.[v]  The Court compared Kyowa’s allegations to those made in Taormina[vi], a case recently decided by the Southern District of New York.  In Taormina, the court found that having branch offices located in New York was insufficient to satisfy Daimler’s at home requirement since the company was incorporated and headquartered elsewhere.[vii]  Similarly, here, ANA was incorporated and headquartered in Japan, and only derived modest revenue from New York.  Thus, Justice Scarpulla found this to be “plainly insufficient to render the ANA Companies ‘essentially at home’ in New York.”[viii] 

The Taormina court also ruled that mere corporate registration does not confer general jurisdiction without express consent.[ix]  Likewise, Justice Scarpulla found this scenario to be analogous, here—ANA had simply registered with the Secretary of State in compliance with the New York Business Corporation Law but did not expressly consent to general jurisdiction.  Therefore, Justice Scarpulla found that the Commercial Division could not exercise general jurisdiction over ANA.[x]

Next, the Commercial Division turned to whether it could exercise specific jurisdiction over ANA under New York’s long-arm statute.  Kyowa asserted that because ANA had “continuously transacted business and conducted their airline operations in New York and contracted for services including for maintenance, and hired employees, and contracted to fly passengers to and from New York, and purchased goods and supplies in New York .. .”[xi] the court could exercise specific jurisdiction over ANA under CPLR 302(a)(1).  According to Justice Scarpulla, CPLR 302(a)(1) requires a two-prong inquiry.  “The first prong requires that the defendant ‘conducted sufficient activities to have transacted business in the state,’ and the second prong requires that ‘the claims [ ] arise from the transactions.’”[xii]  Further, the New York Court of Appeals has held that the transacting business requirement can be satisfied with a lone transaction where the claim has an “articulable nexus” or “substantial relationship” with the transaction.[xiii]  Here, the Court concluded that the claim arose from conduct in Japan—as the MOU was negotiated, signed, and performed there.  Therefore, the Commercial Division concluded that Kyowa’s assertion that some ANA aircraft flew into John F. Kennedy International Airport “utterly fails to state a specific ‘articulable nexus’” between New York and the fraud regarding the flammability certificates.[xiv]  Finding that it did not have either general or specific jurisdiction, the Court granted ANA’s motion to dismiss.

Conclusion

Daimler has shortened the reach of CPLR 301.  In New York, practitioners need to allege specific jurisdiction under the Rushaid test provided that they have an “articulable nexus” or “substantial relationship” between the claim and the defendant’s New York activity.

 

[i] Kyowa Seni, Co. v. ANA Aircraft Technics Co., 2018 BL 240171 (Sup. Ct. July 05, 2018).

[ii] Id. at *2; ANA “allegedly directed Kyowa to execute certificates that the seat covers had been flammability tested, which Kyowa asserts it did in the belief that testing was performed after it produced the seat covers.” Id. at *1.

[iii] Id. at *2.

[iv] Id. at *3.

[v] Id.  “See, e.g., Famular v. Whirlpool Corp., [2017 BL 16901], 2017 U.S. Dist. LEXIS 8265 , 2017 WL 2470844, at *4 (S.D.N.Y. June 6, 2017) (‘a foreign defendant is not subject to the general personal jurisdiction of the forum state merely by registering to do business with the state’); Sae Han Sheet Co. v. Eastman Chemical Corp., [2017 BL 375755], 2017 U.S. Dist. LEXIS 173410 , 2017 WL 4769394 , at *6 (S.D.N.Y. Oct. 19, 2017) (‘In light of Daimler, the more recent authority in this district has held that corporations do not consent to general jurisdiction when they register under the various New York registration statutes.’); Taormina v. Thrifty Car Rental, [2016 BL 425562], 2016 U.S. Dist. LEXIS 176673, 2016 WL 7392214 , at *6 (S.D.N.Y. Dec. 21, 2016).” Id.

[vi] Taormina v. Thrifty Car Rental, 2016 BL 425562 (S.D.N.Y. Dec. 21, 2016).

[vii] Kyowa, 2018 BL 240171, at *3.

[viii] Id. at *4.

[ix] Id.

[x] Id. at *3-4.

[xi] Id. at *4.

[xii] Id. at *4-5 (quoting Rushaid v. Pictet & Cie, 28 N.Y.3d 316, 323 (2016)).

[xiii] Id. at *5 (citing Rushaid, 28 N.Y.3d at 298-99, 323 n. 4).

[xiv] Id.; the Court also found that specific jurisdiction fails under CPLR 302(a)(2) because the complaint fails to allege any tortious act that ANA committed in New York.  Id.